Corning Glass Works Chairman Amory Houghton Jr. deserved to be fired. Houghton says so himself: "I really should have been." In the 1974-75 recession, he concedes, Corning's earnings dropped so fast that--again in his words--"the integrity of the company was in danger." From $4 a share in 1973, the parent company's earnings collapsed to $1.76 in 1975; even cyclical growth companies simply were not supposed to behave this way. "It was a bad scene," he says.

Of course, "Amo" Houghton was not fired. The fifth generation of his family to head this Corning, N.Y.-based billion-dollar (sales) maker of sophisticated glass products, he was treated more gently by his board than any hired hand would have been. He and his family and their trusts, after all, still own 16% of the stock. Houghton got the chance to remain on and to clean up the mess he had allowed to develop.

During three frantic months late in 1975, Houghton changed Corning's management style from paternalistic to survival-of-the-fittest. When he was finished, Corning was down to 29,000 employees from its peak of 46,000 worldwide. Among those departing were 1,200 managers; three vice presidents were demoted. A major business, Signetics, was gone. A total of five plants were closed or sold and thousands of products--such main lines as domestic black-and-white TV bulbs, finished Christmas ornaments, and acid waste drain lines--were eliminated. International operations was folded as a separate division. Even Steuben Glass, a commendable family hobby, was squeezed marginally into the black.

Why weren't the cuts made earlier? Why had Corning been allowed to get so overweight? In his own defense, Houghton says: "It was tough making these cuts, particularly when you lived in a small town where you knew a lot of these people." He admits that a generation of prosperity had made the company complacent, and reminds listeners that it's easier to make hard decisions when the pressure is on than when it isn't. Houghton didn't act soon enough, but it's not difficult to understand why he held off, hoping that the economy would pull him through. Where is the businessman who hasn't from time to time put off making these tough choices when things were going relatively well?

Slimmed down, Corning snapped back with a vengeance in the 1976 economic recovery, and parent company profits per share climbed to a record $4.74; this year they could top $5.40 a share, not counting one dollar or so from its investment in Owens-Corning Fiberglas. But as far as the stock market was concerned, the damage was done: Corning recently sold for $65 a share, about ten times estimated total 1977 earnings, vs. as high as 48 times total earnings in the early Seventies.

"Corning used to be a religion for investors," says Otis Bradley, director of research at Hornblower, Weeks, Noyes & Trask, "but judged by their record, when earnings briefly looked out of control, something has changed; Corning is no Procter & Gamble." Another analyst adds: "Corning's relative growth, peak to peak, is not impressive."

And yet, in many ways Corning is a much better company than it was in the mid-Sixties when it was held in such awe by Wall Street. It could well be on the threshold of its greatest growth yet. The key is something called low-loss optical fiber. Pound for pound stronger than steel, lighter than cotton, thin as a human hair, flexible as silk, transparent as air, these fibers, drawn from glass, may revolutionize communications. As a conductor of light beams, a given volume of the fibers can carry many times as many impulses as a similar volume of copper wire, and may eventually obsolete the latter in telephone communications--as well as in computers, aircraft and for many military purposes.

The market could eventually be over a billion dollars annually.
What is perhaps even more important, Corning, slimmed and toughened, is now in position to exploit its technical advantages. Pre-1974-75, Corning was a decidedly unbalanced company, looking profitable indeed but highly vulnerable. Corning made huge profits because it dominated the business of making the glass envelopes that house TV picture tubes, first for black and white, later for color. Explains Houghton: "In 1966 we had 125% of the domestic market. The extra 25% was due to the high breakage of our glass bulbs by the set manufacturers. We got half our sales and three-fourths of our profits from this single product line."

Houghton's biggest mistake was his failure to realize how very vulnerable this near-monopoly had made the company. "You look at a big profit base like that and you expect maybe it will level off and mature, but you don't expect to lose it altogether." Yet at one point in 1975, new orders on TV picture tubes were down to zero as the recession was compounded by the Japanese blitz of the U.S. TV market. (Japanese producers buy their tubes from Japanese companies.)

This was not the only blow this proud old company suffered. In his haste to make Corning powerful overseas, and not merely an investor, Houghton had picked up control of Sovirel in France and what became Corning Ltd. in the United Kingdom. In the economic crisis that followed the quadrupling of the price of oil, the British unit sank deeply into the red while the French operation was only marginally profitable.

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